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Merrill vs. Morgan: What 3Q Results Say

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Morgan Stanley advisors produced positive net new assets this month, a significant development in its competitive situation vis-à-vis Merrill Lynch.

As of the second quarter, when Morgan had asset outflows, that battle was being won in many respects by Merrill, according to industry statistics and experts interviewed by Bloomberg News.

With 18,000-plus advisors, Morgan Stanley still has the larger force. But when Merrill’s 15,300 brokers are combined with U.S. Trust advisors, Bank of America has nearly 17,000 reps.

Average annualized sales or production per advisor stands at $851,000 for Merrill and $686,000 for Morgan Stanley.

In terms of revenue, the two groups are close: Merrill reps had sales of $9.5 billion in the first nine months of 2010, and Morgan’s had $9.3 billion. BoA widens the divide, though, to $12.6 billion if U. S. Trust advisors are included.

While return on equity for the two wealth-management groups is similar,6% for Morgan and 6.5% for BofA-Merrill, net income is not.

Net income for Morgan’s wealth-management group in the first nine months was $353 million vs. $1.1 billion for BoA – nearly a 1-to-3 ratio in Merrill’s favor.

This means Morgan has to find ways to cut costs and boost results. Its main weapon is consolidation as it merges its workforce and platform with Smith Barney.

For advisors, though, these cuts may be too painful. As specialists are let go, FAs can feel that they don’t have access to the resources they once had, experts say.

The recent recruiting success of smaller firms, like Barclays and Baird, at recruiting Morgan Stanley brokers would appear to support this.